Peyto Exploration & Development Corp T.PEY

Anybody have some further thoughts on Repsol purchase?

[nukester]

Curious if anybody has digested the various aspects of the Repsol purchase.
I hate to see the debt and dilution, but I am cautiously optimistic that a lean operator can squeeze some additional gas molecules out of the old Repsol formations.
Just seems at first glance, they should of grown organically while reducining the balance sheet?

Maybe I am just old school cheap skate?

Peyto certainly knows how to contract drilling crews and put together processing plants on the cheap, but this purchase seems out of character.  Dont want to cast too much negativity, just curious if anybody can show me what I am missing in the deal.

[Truebluefan]

Peyto doesn't have to try very hard to squeeze any additional production out Repsol's assets. Repsol stopped developing their land years ago, all Peyto has to do is drill on largely untapped assets and they will unlock value.  Repsol's land holding are large, so its a long runway for Peyto for the foreseeable future. They bought land and  assets for a relatively mostest

[PabloLafortune]

Peyto bought themselves for anywhere from 50-80% off, didnt they? 10% more shares, 50% more debt right away, 25% more production right away, another 25% more production down the road paid for from improved capital efficiencies. Only thing unclear is the hedging and marketing they inherit if any and the tax situation.

[sportstermathew]

There are so many positives from this deal that it won't take long for Peyto to get its money back. First they will tweak current producing assets almost free money there.  The new production cashflow could go right to paying down at least most of the new debt?? The new plants they get, or old plants will be upgraded to Peyto's standards but give them almost unlimited potential to

[PabloLafortune]

Good post Sports. There's a lack of understanding how corporate life altering this transaction is for Peyto. They were staring down the barrel of a lack of quality locations (thus the production not increasing despite quite a bit of capex) and now they increase those several fold for 10% dilution? Plus the boepd metric is misleading because Repsol hasn't been drilling thus the low decline.

[Truebluefan]

  I agree, the biggest problem Peyto had was lack of quality drilling locations, capital efficiency will likely be realized as early as this winter's program which will see Peyto shift significant drilling activities to the Repsol assets.  Peyto is now a stronger investment with better growth potential or at least created a longer production horizon at roughly the same output

[PabloLafortune]

My (wild) guess is that between capital efficiencies and dividends, they might save enough over 3 years on a per boe basis to cover for the additional debt incurred.  I am assuming....that the operating costs and liquids mix of the new assets will be similar to existing Peyto production once they've put their stamp on them.  In any event, Peyto was 2 story's before: income